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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Provident Financial Plc | LSE:PFG | London | Ordinary Share | GB00B1Z4ST84 | ORD 20 8/11P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 225.00 | 223.60 | 224.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2021 to Apr 2024
TIDMPFG
RNS Number : 6838H
Provident Financial PLC
07 April 2022
7 April 2022
Provident Financial plc ('Company')
Publication of 2021 Annual Report and Financial Statements and Notice of 2022 Annual General Meeting
The Company has today published the following documents:
Hot Features
Premium
- 2021 Annual Report and Financial Statements; and
- Notice of 2022 Annual General Meeting ('AGM').
In compliance with LR 9.6.1R, the 2021 Annual Report and Financial Statements and Notice of 2022 AGM have been submitted to the Financial Conduct Authority via the National Storage Mechanism and will shortly be available to the public for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. These documents will also be available on the Group's website from today at: www.providentfinancial.com/shareholder-hub.
Annual General Meeting
The AGM will be held at 3.00pm on Wednesday 29 June 2022 at the Company's offices at No. 1 Godwin Street, Bradford, West Yorkshire BD1 2SU.
Additional information
A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Company's results statement (RNS announcement dated 31 March 2022 ("Preliminary results for the year ended 31 December 2021")). That information, together with the information set out below constitutes the material required by DTR 6.3.5R. This announcement is not a substitute for reading the 2021 Annual Report and Financial Statements in its entirety. Page, note and section references below refer to the corresponding pages and/or notes/section in the 2021 Annual Report and Financial Statements.
Contact: David Whincup, (0)1274 351 344
Appendix
Principal risks
A description of the principal risks and uncertainties that the Company faces is extracted from pages 93 to 99 of the 2021 Annual Report and Financial Statements.
Principal risks are risks which are inherent to the Group's strategy and business model, and have formally been articulated as part of the Group's risk appetite framework. Principal risk categories and associated risk appetite statements are reviewed and approved by the Board on an annual basis, effectively defining the Group's overall risk appetite.
P1. Capital risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk that the * The Group and bank operate within a defined capital
Group is unable to risk appetite, with thresholds reported to and
maintain appropriate, monitored by Group and bank Boards. The boards
minimum regulatory regularly review both the existing and forecast
capital or an internal capital position to ensure that planned capital
management buffer resources are sufficient for planned changes in the
to cover risk exposures balance sheet.
and withstand a severe
stress as defined
in its risk appetite * In line with the PRA's requirements, the Group's
and in the ICAAP. Internal Capital Adequacy Assessment Process (ICAAP)
is updated at least annually and identifies the
levels of capital required under the regulatory total
capital requirement (consisting of Pillar 1 and
Pillar 2A risks) and any PRA and confidential buffers
(to the extent that any are required). The 2021 ICAAP
evidenced that the Group and bank will continue to be
able to meet their capital requirements including in
stress scenarios over a five-year time horizon.
* In line with industry practice, to ensure
preservation of capital and support business
stability, the 2019 dividend was cancelled and no
dividends were paid by the Group to its shareholders
in respect of 2020. As the macroeconomic outlook has
now improved and in line with the Group's results,
the Group is proposing a dividend in respect of 2021,
to be paid in 2022.
* In October 2021, the Group's first Tier 2
subordinated bond since 2005 was issued for an amount
of GBP200m. It has a 10.25-year maturity that is
callable at the Group's discretion between 5 and 5.25
years, and pays a coupon of 8.875%. The issuance was
written from the Group's GBP2bn EMTN Programme and
was oversubscribed by around 2 times in the market.
The issuance represents an important milestone as the
Group diversifies and optimises its sources of
capital in support of future lending growth. The
Group's risk monitoring measures have been updated to
take account of the Tier 2 issuance.
* At 31 December 2021, the Group's CET1 ratio was 29.0%
(2020: 34.2%) and the total capital ratio was 40.4%
(2020: 34.2%). CET1 decreased over 2021 from GBP675m
to GBP505m, reflecting the costs of closing CCD and
the scheduled unwind of the IFRS 9 transitional
relief in regulatory capital. Total capital increased
over 2021 from GBP675m to GBP705m due to the issuance
of Tier 2 debt capital and includes GBP121m of Tier 2
capital to pre-fund future balance sheet growth.
* On 13 December 2021, the Financial Policy Committee
(FPC) announced an increase to the UK countercyclical
capital buffer rate to 1%, to be implemented by 13
December 2022. Provided the UK economy continues to
recover, the FPC expects to increase the rate further
to 2% in quarter 2 of 2022, to take effect in quarter
2 of 2023. These increases are absorbed within the
capital plans of the Group and bank.
* As previously reported, the Group and bank have
elected to phase in the impact of adopting IFRS 9
over a five-year period. In response to Covid-19, the
PRA ratified additional capital mitigation in 2020
which the Group also fully adopted.
* The Group and bank plans for the unwind of the IFRS 9
transitional adjustment as part of both regular
capital planning and under stress scenarios.
* The Group's Pillar 3 disclosures contain a
comprehensive assessment of its capital requirement
and resources. Pillar 3 disclosures for the year
ended 31 December 2021 are published separately on
the Group's website, www.providentfinancial.com.
-------------------------------- ----------------------------------------------------------------
P2. Funding and liquidity
risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk that the * Liquidity and funding risk appetite is established at
Group has insufficient Group and bank level, with thresholds reported to and
liquidity to meet monitored by the Group and bank Boards.
its obligations as
they fall due, and/or
is unable to maintain * The Group's current funding strategy is to maintain
sufficient funding sufficient available funds and committed facilities
for its future needs. to pre-fund the Group's liquidity and funding
requirements for at least the next 12 months,
maintaining access to diversified sources of funding
comprising: (i) external market funding, including
retail bonds, institutional bonds and private
placements; (ii) securitisation; (iii) retail
deposits; and (iv) access to the Bank of England
Liquidity and Funding Schemes at Vanquis Bank.
* The Group continued to utilise its auto loan
securitisation warehouse facility, drawing a further
GBP50m in February 2021, taking its total drawings to
GBP200m. The warehouse was refinanced and
restructured in July 2021 to improve the efficiency
of the usage of collateral such that drawn funding
increased to GBP275m with no significant increase in
asset encumbrance. The facility also provides for a
committed but currently undrawn amount of GBP50m
which provides contingent liquidity.
* As at 31 December 2020, the Group had a
multi-currency RCF with a total facility size of
approximately GBP148m. In line with the Group's
strategy of reducing reliance on the RCF, some of the
new securitisation funds were used to reduce the
Group's RCF commitments, initially to GBP90m
alongside an extension of the facility to July 2023.
In line with the strategy to reduce its reliance on
the RCF as a source of funding, the Group took the
decision to early repay and cancel the facility in
March 2022.
* In September 2021, the Group repaid its GBP65m, 6.0%
retail bond in line with its contractual maturity.
* In October 2021, the Group successfully completed a
liability management exercise involving the partial
tender and repurchase of GBP71.5m of the then
outstanding GBP175m 8.25% senior bonds maturing in
June 2023, and the issue of GBP200m Tier 2 bonds
(described in capital risk above).
* The above actions taken by the Group during 2021
extended the weighted average maturity of its
non-bank funding.
* The bank accepts retail deposits and, in line with
its regulatory requirements, maintains high-quality
liquid assets to meet the liquidity coverage ratio
(LCR) and its internal stress tests as stipulated
within its Internal Liquidity Adequacy Assessment
Process (ILAAP). The Group and bank monitor and
report the LCR to the PRA on a consolidated and solo
basis as applicable.
* The bank maintained a significant surplus of
liquidity against its regulatory and internal
requirements throughout 2021, and is managing this
down in a prudent manner as the uncertainty arising
from the pandemic is reduced.
* In January 2021, the bank completed its inaugural
issue from its newly established credit card
receivable master trust. The transaction has been
rated (AAAsf/Aaa(sf)/AAAsf) by Fitch Ratings, Kroll
Bond Rating Agency and Standard & Poor's. The bonds
are listed on the London Stock Exchange. These notes
have enabled access to the Bank of England's
Liquidity and Funding Schemes. The majority of the
senior rated notes have now been pledged to the Bank
of England to support borrowing of GBP174m from the
Term Funding Scheme with additional incentives for
Small and Medium-sized Enterprises (TFSME).
-------------------------------- --------------------------------------------------------------
P3. Market risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk to the Group's * The Group and bank have established interest rate
current and prospective risk appetites, with thresholds reported to and
capital and income monitored by Group and bank Boards.
position arising from
adverse movements
in interest rates. * The Group and bank do not actively seek to take
significant unmatched positions and do not operate a
trading book.
* Analysis of an interest rate sensitivity gap is
principally used to assess the Group's exposure to
interest rate risk by identifying unmatched duration
positions.
* The Group and bank report their exposure to interest
rate risk considering earnings at risk (EaR) and
market value sensitivity (MVS). Risk appetite is
assessed against a 100bps and 200bps parallel shock
to interest curves respectively. Risk appetite has
also been established for economic value of equity
(EVE) which is monitored against a 200bps parallel
shift in rates, as well as the six standardised
shocks prescribed by the Basel Committee on Banking
Supervision (effective from the 31 December 2021).
* The Group and bank also monitor their exposure to
basis risk, with the Bank of England base rate and
SONIA the only external reference rates for
on-balance sheet positions. The Group no longer has
any exposure to LIBOR having refinanced the RCF and
Moneybarn's securitisation facility in 2021, which
included revision to the external reference rate to
SONIA.
-------------------------------- ----------------------------------------------------------------
P4. Credit risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk of unexpected * The Group has continued with a cautious approach to
credit losses arising credit risk through the pandemic. Arrears have
through either adverse remained low as consumers continued to receive
macroeconomic factors support via government initiatives, including the
or parties with whom furlough scheme.
the Group has contracted
failing to meet their
financial obligations. * Vanquis Bank has implemented a number of pre-emptive
measures to manage exposures as government support is
withdrawn. These include a limit decrease strategy
for the up-to-date, active book and restriction of
credit lines where external indicators of increasing
financial stress are present.
* The Group has maintained prudent post-model
adjustments in its provision calculations to
compensate for the muting of credit risk indicators,
driven by government support measures through the
pandemic.
* Concentration risks arising from the pandemic have
been considered by the Group's divisions. Populations
likely to be impacted by the pandemic have been
identified and are subject to ongoing monitoring. The
Group has continued to acquire additional data
sources to support the identification of customers
experiencing income shocks or other adverse financial
impacts. This data has been integrated into lending
decisions for our new and existing customers.
* Performance of risk models is being closely monitored,
with adjustments implemented where any deviation from
expected performance is evidenced.
* The Group continues to pursue opportunities to
supplement existing data sources to enhance both
credit and affordability risk, i.e. open banking.
-------------------------------- ----------------------------------------------------------------
P5. Strategic risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk of making * The Board and its sub-committees make risk-based
poor strategic decisions decisions in the formulation of business strategy, in
related to acquisitions, line with the delegated authority framework and
products, distribution, subject to independent oversight from the Risk
etc. as a result of function.
ineffective governance
arrangements, processes
and controls. * Strategic redirection from high-cost to medium-cost
lending following the closure of CCD and SOA to cap
potential liabilities that would adversely affect the
Group.
* Board governance manual and Delegated Authorities
Manual (DAM) in place to provide framework for key
decision making at all levels across the Group and
divisions.
* Executive director scorecards in place with reward
incentives based on a combination of financial and
non-financial measures.
* Group risk appetite framework in place with agreed
measures and thresholds approved by the Group Board.
* Strategic and emerging risks reported to the GERC and
GRC on any areas of concern.
* Risk overlay completed annually by the Group CRO on
behalf of the RemCo to provide recommendations on
adjustments to variable reward where governance has
failed.
-------------------------------- ----------------------------------------------------------------
P6. Climate risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The physical risk * Climate risk adopted as a Group principal risk, with
of the impacts of supporting risk appetite established to provide
climate change and greater focus on compliance with the Task Force for
the business risk Climate-related Financial Disclosures (TCFD)
posed to the Group recommendations, forming the basis for the
and its counterparties development of science-based targets from 2022
related to non-compliance onwards.
costs and financial
loss associated with
the process of adjusting * Group-wide climate strategy and policy in place to
to a low-carbon economy. ensure appropriate governance, controls and processes
are in place to support compliance with TCFD
recommendations and broader ESG strategy (including
net-zero targets).
* Climate Risk Committee operational, supported by
Climate Risk and Environmental Working Groups,
facilitating integration of climate considerations
into the Group's broader Risk Management Framework
through its reporting lines into the Customer,
Culture and Ethics Committee and Group Executive
Committee.
* New scenario analysis and stress testing framework in
development to drive enhanced monitoring of PFG's
exposure to material short and long-term impacts of
transition and physical climate-related risks, and to
inform forward-looking strategy. ICAAP activity
continues to take account of material climate-related
financial impacts, meeting PRA requirements.
* Monitoring of material supplier emissions and
colleague and customer impacts, such as altered
commuting activity and changes to living costs,
including energy price increases.
* Continued offsetting of direct operational (scope 1
and 2) greenhouse gas emissions via investment in
sustainable development projects and all the Group's
main premises certified to the environmental
management standard ISO 14001:2015.
-------------------------------- ----------------------------------------------------------------
P7. Legal and governance
risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk that the * Board governance manual and Delegated Authorities
Group is exposed to Manual (DAM) in place to provide framework for key
financial loss, fines, decision making at all levels across the Group and
censure or enforcement divisions.
action due to failing
to comply with legal
and governance requirements * Board effectiveness is assessed on annual basis with
as a result of ineffective action plans in place to promote a culture of
arrangements, processes continuous improvement.
and controls.
* Explicit approval from the Group Board is required
before decisions and actions that could result in
risks outside of appetite are made.
* Conflicts of Interest Policy and processes in place
to ensure all employees meet their fiduciary
responsibilities.
* All regulatory interactions are recorded and tracked,
with regular reporting through our executive and
Board committees to ensure consistency and read
across through a Group lens.
* The Group proactively engages with regulatory
authorities and industry bodies on forthcoming
regulatory changes.
-------------------------------- ----------------------------------------------------------------
P8. Financial crime
risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk that the * The Group is committed to operating a strong and
Group's products and risk-proportionate set of systems and controls to
services are used manage the risk within appetite.
to facilitate financial
crime against the
Group, customers or * Financial crime improvement programme in Vanquis,
third parties. primarily focused on implementing enhanced
surveillance technology, has largely been completed.
* Financial crime risk appetite statement and metrics
refreshed providing improved insight of the key risks
to senior management.
* Regulatory actions and notifications are
managed/monitored in line with relevant timescales
and regular horizon scanning is in place to identify
relevant and significant regulatory change.
* New financial crime risk assessment methodology
implemented which will enhance identification of
financial crime risks and threats and how these are
mitigated through the organisation. This has begun
with Vanquis and will be rolled out across the Group.
* System investment for PSD II and better decision
making science within the ruleset resulting in less
losses and victims of fraud within Vanquis.
-------------------------------- ----------------------------------------------------------------
P9. Conduct and regulatory
risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
Conduct risk: The * Conduct risk appetite refreshed providing greater
risk of customer detriment focus on outcome measures.
due to poor design,
distribution and execution
of products and services * New Conduct Risk Framework is being developed to
or other activities provide improved monitoring of customer outcomes
which could lead to across all high-risk interactions including lending,
unfair customer outcomes forbearance, vulnerability and complaints.
or regulatory censure.
Regulatory risk: The
risk that the Group * Conduct policies and procedures in place at a
is exposed to financial divisional level to ensure appropriate controls and
loss, fines, censure processes that deliver fair customer outcomes.
or enforcement action
due to failing to
comply with laws or * New Group Responsible Lending Policy has been
regulations (including developed providing overarching principles for all
handbooks, codes of the divisions in response to the changing regulatory
conduct, and statutory environment and requirements around sustainable
and regulatory guidance). lending.
* During the pandemic we have ensured that our
customers continue to receive the service they need
during these difficult times, in particular the
provision of payment deferrals in line with FCA
guidance.
* A number of regulatory programmes remain under close
management, most notably Persistent Debt and PSD II
(SCA). Projects are in place to oversee delivery and
updates provided to the regulators as required.
* Establishment of Group Complaints Forum and reporting
to ensure we are learning from complaints trends
across the divisions, including any FOS referrals or
upholds and actions of claims management companies.
This has resulted in a number of strategic changes
outlined in our emerging risks 'Threats to our
business model' and 'Responsible lending'.
-------------------------------- ----------------------------------------------------------------
P10. People risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk that the * Harmonisation of People and Human Resource functions
Group fails to provide into central shared service.
an appropriate colleague
and customer-centric
culture, supported * Move to Group-consistent framework for performance
by robust reward and management including the roll-out of 'Be Better'
wellbeing policies objective setting.
and processes, effective
leadership to manage
colleague resources, * Succession plans completed and in place for all
effective talent and executive and senior management.
succession management,
and robust controls
to ensure all colleague-related * Balanced scorecards introduced and aligned across the
requirements are met. Group and divisions with clear frameworks and
evaluation criteria established through RemCo for
variable pay.
* A number of ongoing communications have been and
continue to be shared with colleagues at a Group and
divisional level to keep them informed of business
changes to support wellbeing.
* Full health and safety risk assessment completed of
all our key work locations with mitigating actions
completed.
-------------------------------- ----------------------------------------------------------------
P11 . Technology and
information security
risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk arising from * An IT First Line Controls Review (FLCR) is in
compromised or inadequate progress which will baseline and standardise risk
technology, security management and control across the Group's IT
and data that could functions.
affect the confidentiality,
integrity or availability
of the Group's data * Group-wide security improvement programme has been
or systems. initiated to deliver an ISO 27001 aligned framework.
* The investment and development of a new Group IT
platform capable of housing multiple products, the
new Sunflower Loans business being the first, and
addressing technical debt/legacy issues being
faced/experienced across the Group.
* Data Protection Officer (DPO) reporting transferred
to the Group Risk function to reinforce independence
of office covering oversight arrangements.
* Group governance and centres of
excellence/communities of interest have been
established for security, architecture, resilience
and risk (GRC).
-------------------------------- ----------------------------------------------------------------
P12. Operational risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk of loss resulting * The 3LOD model throughout the Group ensures there are
from inadequate or clear lines of accountability between management
failed internal processes, which owns the risks, oversight by the Risk function
people and systems and independent assurance provided by Internal Audit.
or from external events.
* Operating arrangements put in place in response to
the Covid-19 pandemic have become business-as-usual
practice as we continue to operate in an agile
manner.
* Risk Harmonisation Programme launched to build out
single ERMF including control self--assessment,
consolidated risk policy taxonomy, and risk
reporting.
* The operational risk and control self-assessment
methodology has been enhanced and expanded to cover
the full suite of risks facing the Group with more
timely reporting, monitoring and escalation.
* Vanquis Risk Enhancement Programme to enhance first
line risk and control activity established and
significantly progressed against its objectives.
* Group Transformation function has been established to
provide central change and programme management
capabilities.
-------------------------------- ----------------------------------------------------------------
P13. Model risk
-------------------------------- --------------------------------------------------------------
Risk description Mitigating activities and other considerations
The risk of loss as * Further embedding of the new Group Model Risk
a consequence of decisions Management Framework and Model Risk Policy as well as
that are based on the development and implementation of necessary
incorrect or misused supporting modelling standards.
model outputs and
poor governance or
errors in the development, * Material models across the Group are independently
implementation, or validated as required in the policy and as per the
use of models. independent model validation plan.
* Group model inventory, containing key models across
the Group, is reviewed and updated on a regular basis
and has all the necessary information to enable
effective model risk reporting and planning.
* High-risk issues and findings on material models are
addressed urgently and outstanding model risk issues
and findings are monitored and reported to relevant
governance forums across the Group.
* Group Model Governance Forum meets regularly and
effectively provides model risk oversight and drives
standardised approach to model development and
governance across the Group.
* Model risk target operating model delivered including
the recruitment of additional resources to enhance
the current model validation and governance
capability.
-------------------------------- ----------------------------------------------------------------
Responsibilities statement
The Directors' responsibilities statement is extracted from page 168 of the 2021 Annual Report and Financial Statements.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements in accordance with relevant IFRS, IFRIC interpretations and the Companies Act 2006.
Patrick Snowball Chairman
Malcolm Le May Chief Executive Officer
------------------------
Neeraj Kapur Chief Finance Officer
------------------------
Andrea Blance Senior Independent
Director
------------------------
Angela Knight Non-Executive Director
------------------------
Elizabeth Chambers Non-Executive Director
------------------------
Margot James Non-Executive Director
------------------------
Paul Hewitt Non-Executive Director
------------------------
Graham Lindsay Non-Executive Director
------------------------
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END
ACSFLFVFSFIDIIF
(END) Dow Jones Newswires
April 07, 2022 08:34 ET (12:34 GMT)
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